Survey: 401(k) Investors Engage More With Advisors

By Cyril Tuohy

InsuranceNewsNet

Workers who participate in employer-sponsored retirement plans become more engaged investors when using a financial advisor compared with employees who don’t use advisors, according to a new study of retirement plan savings habits.

Workers who use advisors set aside, on average, 9.5 percent of their pretax salaries to their retirement plans compared with 8.6 percent for workers who don’t work with advisors, the survey by Natixis Global Asset Management found.

As a result, workers who use financial advisors tend to be better prepared for retirement.

Even with advisors, many employees aren’t socking away enough to comfortably fund their golden years and many employees are still falling short of their goals.

Advisors say workers should set aside between 12 and 15 percent of pretax income in order to prepare for retirement.

“Our research shows that Americans save for retirement when they have access to 401(k) plans, and those who use advisors are typically more engaged investors,” John Hailer, chief executive officer of Natixis Global Asset Management, said in a news release.

Survey results are based on input from 1,000 respondents, of which 899 were enrolled in 401(k) programs.

Workers like 401(k) defined contribution plans because they are portable. Workers can simply roll over their 401(k) balance once they leave an employer.

The payroll deduction also makes 401(k)s convenient. Since the funds are invested directly from the payroll deposit and never enter a checking account, employees don’t get the chance to spend the funds.

Employees only come into contact with their 401(k) balance when they open their statements and see larger balances due to the growth of principal and interest, or when they decide to roll over the balance if they leave the company or retire.

The Natixis survey also found that without financial advice, educational items like printed documents and planning spreadsheets, as well as online tools such as retirement calculators and interactive graphs, may not be enough to convince workers to make full use of what is quickly developing into a vital employer-sponsored benefit.

Retirement income calculators, one of the most popular tools on retirement websites, are used by only 38 percent of participants, the survey found.

The survey also found that many workers admit to being confused by their employers’ 401(k) materials and would invest more if they were more familiar with and knowledgeable about their employer-sponsored defined contribution plan.

Although 51 percent of respondents say employers offer personalized performance benchmarks, the survey found, only 23 percent of respondents admit to using them.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].